Gold jumped to new 3-month highs as London traders returned from the August Bank Holiday on Tuesday, rising above $1418 per ounce as world stock markets fell. Silver hit its best level since April at $24.50 per ounce.

Other commodities also rose, erasing the last of their summer drop alongside precious metals, whilst major government bonds ticked higher, edging interest rates back down from their recent two-year highs. 

“The price action remains bullish with higher highs and higher lows,” adds technical analysis of the gold chart from market-maker Scotia Mocatta.

“Gold,” says Eugen Weinberg at Commerzbank, “is clearly finding support from the geopolitical risks in the Middle East and North Africa, amongst other things.”

US secretary of state John Kerry yesterday called chemical attacks on civilians by Syrian government troops “a moral obscenity”, while weapons inspectors from the United Nations were shot at near Damascus.

US Treasury Secretary Jack Lew meantime said that the US government will have only $50 billion to spend by mid-October, and urged Congress to raise the “debt ceiling” to avoid running out of spending money. The threat of that crisis in 2011 saw the gold price surge to all-time highs above $1900.

“Such a scenario could undermine financial markets and result in significant disruptions to our economy,” Lew said Monday.

After Friday’s weak sales data for new US homes, yesterday’s surprise drop in Durable Goods Orders “[is] again raising expectations that the Federal Reserve may actually not move to trim its bond purchases until October at the earliest,” says one gold analyst.

Noting that precious metals are “the star performer” in the third quarter of 2013 so far, “Even as the threats of tapering and fund outflows are weighing down on gold,” says Deutsche Bank, “this is partially offset by expectations of opportunistic demand from India.”

But forecasting a drop to average $1250 in the fourth quarter, Morgan Stanley says “a strengthening US currency and rising US bond yields have already proved to be a major headwind to gold. “We expect this backdrop to be reflected in reduced investor net long positioning in the paper gold market and further reductions in the holding of physically backed gold ETFs.”

Speculators trading US gold futures and options last week cut their bearish bets and increased their bullish positions, new data showed late Friday. Rising to a 6-month high, the “net long” balance of bullish minus bearish bets rose to 320 tonnes equivalent, up by 25% from a week before.

Cash-price positions in exchange-traded gold trusts – favored by Western fund managers – also rose for a second week running, data from Bloomberg show, after sinking 25% in 2013 to four-year lows.

Emerging-market central banks raised their gold bullion positions again in July, new data from the International Monetary Fund showed this morning. Russia added 6.5 tonnes to confirm its position as the world’s 7th largest gold holder, breaking the 1,000-tonne mark for the first time. Turkish bank deposits added a further 22 tonnes to Ankara’s holdings, the 11th largest at 464 tonnes.

Intervening to try and defend the value of their currencies, however, cost emerging-market central banks some $81 billion of “emergency reserves” since May, according to analysis from Morgan Stanley, which excludes China.

“It would be desirable for advanced economies to implement a more predictable exit [from, quantitative easing],” said Mexico’s central-bank governor – and one-time IMF managing director candidate – Agustin Carstens at the weekend’s Jackson Hole symposium in Wyoming. “Better communication, speaking with one voice, is very important.”

Brazilian finance minister Guido Mantega said yesterday his country is suffering a “mini crisis” as a result of the US Federal Reserve communicating its aims “poorly”.

“The United States,” says China’s vice-finance minister Zhu Guangyao, “must consider the spill-over effect of its monetary policy, especially the opportunity and rhythm of its exit from the ultra-loose monetary policy.”

Adrian Ash, Guest Contributor to MiningFeeds.com

About the author: Adrian Ash is head of research at BullionVault.

Following a week of explosive precious metals and mining share prices, Gary Savage, technical gold trader and publisher of the Smart Money Tracker, was kind enough to share his comments.

Gary’s trading calls have outperformed most of the world’s hedge funds during 2011 and 2012.

Gary in your writings you’ve indicated that as of last week, the metals and miners have now completed what you call a “1-2-3 reversal”, which I’m wondering if you can talk about and explain the gravity of to people reading.

Sure. A 1-2-3 reversal or some people call it an A-B-C reversal, it’s just a change from a pattern of lower lows and lower highs to a pattern of higher highs and higher lows, and silver, platinum, palladium and the miners have all completed that 1-2-3 reversal within the last week. We were just waiting on gold to do the same thing and confirm that the cyclical driver of the sector was also in line with the rest of the metals and gold did that last Thursday.

Gary, a popular question over the past week, is if there will be another pullback for people to add positions after this explosive move. What are your thoughts there?

Well, it has been my opinion that the last eight months was not a completely natural move. I think the precious metals were manipulated to a great extent into an artificial bear market. But I think the manipulation for the most part is done, other than maybe a little short term stuff around options expirations.

So I think the big money is now trying to get in on the long side and I think this move up out of this bear market bottom probably isn’t going to behave like a normal rally. The market is breaking the manipulation and it’s going to have a violent regression to the mean for the secular trend to slam back into control. My earlier theory was that we were going to see a pretty strong V-shaped rally out of this bottom and if you look at a five-year chart of gold that appears to be what’s going on.

So it’s very possible we could see gold retesting the September 2011 highs in the next three or four months depending on how hard the dollar falls. If the dollar is testing the 2011 lows, I think gold is going to be testing the all-time highs.

What were your thoughts last Thursday when we saw the explosion take place in the metals and miners and at the same time the general equities market moved down strongly? Further, if the equities markets collapsed 10%, 20%, 30%—how would you expect the miners to perform?

I don’t think the stock market is ready to collapse yet, but we’ve got a big problem in the bond market. The bond market is starting to come unraveled and the Fed in my opinion is going to have to increase QE to try and reclaim control. It’s puncturing the eco bubble in housing.

So I think the Fed, at the very least, is going to continue to flood the market with $85 billion a month. That $85 billion has to go somewhere. I suspect the decline in stocks is pretty close to being over with. Maybe a few more days but I think we’re going to go back up. We’re going to make at least marginal new highs. If not, maybe a push to 1800.

But I also think that stocks are in the last leg of this cyclical bull market and I believe that once we top, I believe probably later this fall, that stocks are going to enter a really volatile trading range for the next year and as that process progresses and as liquidity comes out of the bond market and the eco bubble in housing, I think that liquidity is going to find its way into the commodity markets.

So I think the big trending moves from here until late 2014 or late 2015 are no longer going to be in stocks, bonds or real estate. I think it’s going to be in the commodity markets. Specifically I believe it’s going to be in the precious metals markets. It’s where the really big gains are going to be made.

Is there a point in your opinion where the traders and funds will catch the scent of blood in the dollar and begin piling on shorts or looking to make money with its potential currency crisis?

Yeah. I think there is. We’ve been in this megaphone topping pattern for about four, five months now in the dollar index and that is an expanding volatility pattern. It’s a sign of extreme stress. So I believe when the dollar breaks below the lower trend line of that megaphone topping pattern, the route will become very aggressive and we may even see the 2011 lows tested by October, November of this year.

What’s the most common psychological mindset you’re seeing right now from people looking at the precious metals space?

Well, I think the psychology right now is that people are still nervous. They’ve watched for eight months while this thing has dropped and bounced and then dropped again and on and on and on.

So a lot of people don’t believe the move yet and I believe they’re going to get left behind. In my opinion it’s pretty clear that we’ve put in a yearly cycle low and we’ve begun an intermediate degree rally, and I don’t think this is the time to be trading in and out of the metals market. I think you need to get in and stay in at least until this intermediate cycle tops and I don’t expect that to happen until the dollar cycle bottoms and that isn’t due until the end of October or early part of November at the earliest.

So I think people need to enter and then sit tight until later this fall at a very minimum. We will get some sense after the next intermediate correction as to whether or not the bull market is ready to continue or whether we’re going to continue chopping sideways.

Is this mental challenge typical of major long term bottoms where maybe a lot of people say, “Well, I will just wait for the next low,” and then it simply comes and goes and never returns, leaving the person behind, so to speak?

Very typical. When you have a bear market like we did, people are very nervous and as we come up off that bottom, they’re afraid to buy because they’re nervous and then they get into this mentality of, “Well, I’ll buy the dip.” Well when the dip comes, it looks like the bear market is resuming. So they can’t buy and they wait until we start going up again and exactly like what has happened this time, we go up very aggressively so we get overbought very quickly and then they can’t buy because it’s overbought.

So they’re back into that mentality. “Well, I’ll wait for a dip”. Again, as soon as the dip comes, it looks like the bear market is starting. They can’t buy again and so they continually miss the move, and then what happens is they start to become convinced that they’re buying at tops and they end up selling at bottoms.

So that’s how the bull continues to knock people off even as it goes up and that’s what produces these very aggressive moves. All of these people are chasing at the wrong time and then getting knocked off in corrections.

Like I said, I think at this point, it’s pretty clear we have at least a yearly cycle low and an intermediate degree rally. We need to get in, not worry about daily wiggles and just sit tight until later this fall.

Gary, what kind of time frame do you think big pools of capital (tens or hundreds of millions)—How much time does that money need in order to get positioned? Can they do that in just a couple of days or do they need weeks or months to fully accumulate whatever it is that they’re buying?

I think they positioned themselves during the bear raid. I think that was the purpose of the bear raid, for big money to not only knock the sector down, but to get a better entry. Let’s say if the next leg of the bull was to start at $1600 and go to – I’m picking a number out of the air but let’s say $3200. That would be about a typical leg up in the secular bull, about 100%.

So if you entered at $1600 and got out at $3200, you made about 100%. Well if you can manufacture a bear raid to move the market down and enter at $1200, and get out at $3200, now you’re not making 100%. You’re making 200% and you’ve knocked a lot of people off and allowed yourself an entry into big positions at a much lower starting point. I think that’s what happened over the last eight months.

So Gary, what are your thoughts here on performance going forward for mining shares, as well as silver? The mining industry faced a borderline extinction event over the last year. What are your thoughts when you look at those two groups?

I believe that both of those are going to be the biggest gainers over the next two years, simply because they got beaten up so badly, much more so than what the fundamentals were calling for. So I think the regression to the mean is going to be most violent in those two sectors.

To further ask you a speculative question—what kind of numerical expectation do you have for those two groups?

If gold tests $1900, I think silver could get to $40. In the miners, that one is kind of a toss-up. If gold is testing at $1900, the HUI could be testing between 500 and 600.

As a final question for people reading, over the next couple of weeks is there anything that people should be doing or thinking about?

I think the best trading strategy at the moment is just to buy and sit on your positions until we get some signal that the intermediate cycle is approaching a top and we’re not even close to that at the moment.

NEWS RELEASE.

August 15, 2013: Montreal, Quebec – Stornoway Diamond Corporation (Stock Profile – TSX:SWY) announce the appointment of Mr. Hume Kyle to the Board of Directors, effective immediately.  Mr. Kyle is the Executive Vice President and Chief Financial Officer of Dundee Precious Metals Inc.

Mr. Ebe Scherkus, the Chair of Stornoway’s Board of Directors commented: “We are very pleased to welcome Hume to the Stornoway board. Hume’s extensive financial experience in the resource capital markets and in the operation of large scale natural resource businesses will greatly benefit the company as we move forward with the next stage of our evolution, the development of the Renard Diamond Project.”

Mr. Hume has a broad range of financial expertise and business experience spanning over 25 years in both the public and private sectors. Prior to joining Dundee Precious Metals in June 2011, Mr. Kyle held increasingly senior financial executive positions in a number of large, publicly traded, multinational energy and natural resource businesses, including TransAlta Corporation,  Fort Chicago Energy Partners L.P., Nexfor Inc., and Noranda Inc.

Mr. Kyle is a Chartered Accountant and Chartered Financial Analyst and holds a Bachelor of Arts degree in economics and accounting from the University of Western Ontario and a Graduate Diploma in accounting from McGill University. He has served on a number of corporate and industry boards and has been an active supporter of local organizations, including the United Way.

To learn more about Stornoway Diamonds – CLICK HERE.

CompanyFeed™

It’s been a long painful slide for gold and silver – but if today’s trend continues the worst may very well be over.

In a recent article entitled, “Why Gold May Trend Up for the Rest of 2013”, MiningFeeds guest contributor Adrian Ash looked at three reasons why the sector could be poised for a recovery.

1.  Japan is doubling its monetary base inside two years, while the People’s Bank of China has taken to one-day injections of almost $3 billion for the financial system, boosting shares after a scary jump in bank interest rates.

2.  Wage talks in South Africa’s gold mining industry stalled recently, with management offering 5% where the unions want a raise of 60-100%.

3.  Giant banks who swerved around the financial crisis 5 years ago are now risking a crash in summer 2013. Barclays bank – “widely regarded as one of the UK’s strongest” according to the BBC – is nearly £13bn short of capital requirements (almost $20bn). Deutsche Bank paid €630m ($830m) in April-to-June alone to settle lawsuits from customers mis-sold rubbish US mortgage investments.

Coupled with yesterday’s geopolitical news out of Egypt, it looks like the winds may be changing for precious metals and precious metal equities. At the time of publication, gold is currently up $26 to $1,386 (+1.9%) and silver is up a whopping $1.12 to $23.06 (+4.9%).

Given the potential “sea change” we take a look at three precious metal stocks that could also be poised for recovery.

1. Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF)

Tomorrow is graduation day for Balmoral Resources – the company’s shares will begin trading on the TSX big board.

As per usual the company has been quietly getting things done. On August 6th Balmoral reported that drilling resumed on the company’s Martiniere Property in Quebec, with several holes already completed. The Martiniere Property forms part of the company’s wholly owned Detour Gold Trend Project which spans over 82 kilometres along the Sunday Lake Deformation Zone in Quebec.

Around this time last year the company announced bonanza-grade intercepts of 1,530 g/t (44.6 ounces per ton) gold over 0.55 metre (1.8 feet) and 409 g/t gold (11.9 ounces per ton) over 0.50 metre (1.6 feet) from Martiniere. Let’s see if Darin Wagner and his team can deliver the goods again this year.

2. Pilot Gold Inc. (TSX:PLG & OTCQX:PLGTF)

Often referred to as one of the top junior gold miners in the sector, Pilot Gold is well positioned financially for a recovery. The company currently has just under $30 million in net current assets (as reported on August 13, 2013) or roughly $0.30 per common share.

In a 2012 exclusive interview with MiningFeeds, Pilot Gold was highlighted by Canaccord’s Chairman Peter Brown as one of his top picks. Mr. Brown pointed out, “The company has an excellent management and geological team.”

On July 23, 2013 Pilot Gold announced results from its flagship property TV Tower. The KCD target returned 15.3 grams per tonne (g/t) gold over 45.2 metres keeping pace with previously announced results from the area.

About the results, Dr. Moira Smith, chief geologist of Pilot Gold commented, “The current phase of drilling, focused on areas to the north and west of the original discovery, confirms the presence of high-grade gold mineralization extending into sparsely drilled areas predicted to host gold based on our geological model. These exceptional drill results will allow us to model high-grade gold in the upcoming resource estimate with greater confidence.”

3. Silver Wheaton Corp. (TSX:SLW & NYSE:SLW)

With silver rocketing up nearly 5% today we would be remiss not to include a silver company. Silver Wheaton is the largest silver streaming company in the world. Silver streaming, the process of securing silver from mining companies through long term price contacts, provides Silver Wheaton with a stable long term supply of the shiny grey metal. The company also has a smaller gold stream with 145 thousand ounces of gold forecast for 2013.

In response to the company’s second quarter results issued yesterday, Raymond James analyst Phil Russo comments, “Silver Wheaton’s attributes continue to hold in the current environment with its low cost asset base and production growth equating to healthy cash flow generation even at low metal prices. While a lighter quarter earnings wise, we expect Silver Wheaton to gain momentum in the second half of 2013 particularly as inventory levels have traditionally cleared towards the end of the year.”

TD Securities analyst Daniel Earle notes, “We are adjusting our numbers for Q2/2013 results and raising our target multiples consistent with those we assign to Franco-Nevada. Overall, our 12-month target price rises to $34.00/share (from $27.00) and we are maintaining our Buy recommendation.”

The company represents a leveraged hedge to the price of silver. Today the company’s shares are up 7.1% last trading at $27.72.

For the MiningFeeds list of publicly traded silver companies – CLICK HERE – for the list of public gold companies – CLICK HERE.

Disclosure: at publication date Balmoral Resources is a client of MiningFeeds.

NEWS RELEASE.

August 15, 2013: Vancouver, BC – Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF) announces it has received final approval for the listing of the Company’s common shares on the Toronto Stock Exchange (the “TSX”).

Balmoral’s common shares will commence trading on the TSX effective as of the open of the market on Friday, August 16th, 2013. Upon listing on the TSX, the common shares of the Company will continue to trade under the symbol “BAR”.

In conjunction with the listing on the TSX, the Company’s common shares will be delisted from the TSX Venture Exchange following the close of trading today, August 15th 2013.

The TSX is the premier stock exchange for resource companies and Balmoral believes that the move to the TSX will facilitate simpler and more comprehensive access to a broader range of international and institutional investors and capital pools. The increased exposure for the Company comes at a time when the focus in the gold business is turning to expanding high-grade gold assets in jurisdictions with lower political, cultural and economic risk profiles like those under exploration by Balmoral in Quebec.

To learn more about Balmoral Resources – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

August 7, 2013: Montreal, Quebec – Stornoway Diamond Corporation (Stock Profile – TSX:SWY) announces an update on recent activities at certain non-core exploration properties under option to North Arrow Minerals Inc. (“North Arrow”; see Stornoway press release dated March 14, 2013). The option agreement allows North Arrow to acquire an 80% interest in each of the Qilalugaq, Pikoo and Timiskaming exploration projects by fully funding and completing a defined exploration program specific to each project. Drill programs have now been completed for the Pikoo and Temiskaming projects, with the following results.

Pikoo Project, Saskatchewan

During June and July, North Arrow completed ten drill holes (2,002 meters) at the Pikoo project, located approximately 120 kilometres east of La Ronge, Saskatchewan. Drilling targeted two separate areas with previously un-sourced kimberlite indicator trains. Hypabyssal kimberlite was intersected in nine of ten drill holes.

The most significant discovery was in the “South” Pikoo area where target PK150 returned kimberlite intersections from three holes: 28.89 meters (hole DDH13PK06 at a -590 inclination), 22.12 meters (DDH 13PK08 at -490) and 20.12 meters (DDH 13PK09 at -600). The PK150 kimberlite is interpreted as a near vertical body with a drill defined strike length of at least 75 meters. It is described as a dark grey hypabyssal kimberlite containing abundant olivine as well as common ilmenite, common garnets (purple to orange) and less common chrome diopside. Internal country rock dilution is estimated as less than 5% and mantle nodules ranging up to 10 cm have been observed.

In the “North” Pikoo area, five drill holes tested an east-west trending target over a 1.1 km strike length. The drill holes encountered between one and six individual kimberlite dykes ranging from 3 cm to 59 cm in width, interpreted to be vertical to steeply south dipping. Surficial Indicator mineral anomalies suggest the dyke system extends over a significantly greater strike length than tested by the current drill program.

The Pikoo project drilling program has confirmed the existence of a new kimberlite field within the Sask Craton of northern Saskatchewan, as suggested by previous geochemical sampling. Kimberlite intersections from drill holes that tested PK150 will be submitted for microdiamond analyses. Results from this work are expected in approximately eight weeks.

Temiskaming Project, Ontario

During March and April of this year, North Arrow completed five drill holes (547 m) on four geophysical targets located up ice from an un-sourced kimberlite indicator mineral train. Kimberlite was not intersected in any of the drill holes.

To read about the terms of the option agreement – CLICK HERE.

CompanyFeed™

NEWS RELEASE.

August 6, 2013: Vancouver, BC – Balmoral Resources Ltd. (Stock Profile – TSXV:BAR & OTCQX:BALMF) reported that drilling has resumed on the Company’s Martiniere Property in Quebec, with several holes already completed. The Martiniere Property forms part of the Company’s wholly owned Detour Gold Trend Project which spans over 82 kilometres along the Sunday Lake Deformation Zone in Quebec.

The initial phase of the summer drill program will focus on further delineation and expansion of several near surface, high-grade gold zones on the Martiniere Property, including those in the Bug Lake area (Hanging Wall, Bug Lake and Footwall Zones), Martiniere West area (West Zone and newly discovered West Zone Extensions) and recent discoveries in the Martiniere East area, (ME-11, ME-16 and ME-23 occurrences). The first target for expansion is in the Bug Lake area where vertical extensions of the high grade core of the Bug Lake Zone, Hanging Wall Zone and potential vertical extensions of the bonanza grade Footwall Zone are being targeted.

Pending completion and receipt of results from on-going geophysical and geochemical programs on the Martiniere Property, and elsewhere throughout the broader Detour Gold Trend Project, drill testing of several high-priority exploration targets is also planned as part of the Company’s on-going target generation program. As currently outlined, the summer drill program calls for a minimum of 12,000 metres of drilling to be completed.

“At a time when the gold business is in a state of flux, expanding, high-grade, near surface gold systems in stable political jurisdictions, like BAR’s Martiniere discoveries, should represent “go to” gold assets” said Darin Wagner, President and CEO of Balmoral. “We have successfully expanded this high-grade gold system, on multiple fronts, during each previous phase of drilling and look to continue further delineating the scale of the opportunity at Martiniere, and across the breadth of the Detour Gold Trend Project, with our current program.”

To learn more about Balmoral Resources – CLICK HERE.

CompanyFeed™

Put aside the rise in US interest rates, GDP and Fed tapering talk. Just glance at the rest of this summer’s headlines, and you’d think it offered a bull market for ‘hard money’ gold and silver.

1.  Japan is doubling its monetary base inside two years, while the People’s Bank of China has taken to one-day injections of almost $3 billion for the financial system, boosting shares after a scary jump in bank interest rates.

2.  Wage talks in South Africa’s gold mining industry stalled Monday, with management offering 5% where the unions want a raise of 60-100%.

3.  Giant banks who swerved around the financial crisis 5 years ago are now risking a crash in summer 2013. Barclays bank – “widely regarded as one of the UK’s strongest” according to the BBC – is nearly £13bn short of capital requirements (almost $20bn). Deutsche Bank paid €630m ($830m) in April-to-June alone to settle lawsuits from customers mis-sold rubbish US mortgage investments.

Yet here we are, back down below April’s crash low of $1322 in gold and well under $20 for silver. Yes, that’s above end-June’s three-year lows. Yes, the rebound has been strong so far. But so it should be after prices fell at their fastest pace in three decades. Other big banks are meantime making great money trading the rise in longer-term US interest rates.

Those rates have risen because the US Fed says it’s likely to start trimming its money-printing QE program soon. And those cuts only look more likely after the US Treasury said Monday that its deficit – the gap between what Washington spends and receives – has shrunk 40% so far this fiscal year, cutting the amount of new debt it needs to sell to the bond market.

As the trading desks thin out for the summer however, some big-name investors with longer time horizons are buying this drop in bullion. Michael Cuggino, president of the $12bn Permanent Portfolio Family of Funds, thinks gold will rise long-term on rising inflation. “What you’re seeing,” reckons Mark Mobius, emerging-markets specialist at Franklin Templeton, which now runs $813bn for investors, “is a dissonance between real demand and derivatives. So from a longer-term perspective we believe gold prices will trend upwards.”

On that point, Swiss bank UBS – a London market-maker and major world dealer in bullion – calls China’s physical demand “strong” and says it “holds the promise of a sturdy price floor” as banks in the world’s second largest economy widen access to gold bullion through new savings accounts. And on the US government’s shrinking deficit, note that:

• it’s still forecast well over $1 trillion for 2013 as a whole, the fourth largest ever;

• the relief comes from a one-off payment of $66bn from the state-guaranteed mortgage lenders Fannie and Freddie, nationalized during the 2008 crisis;

• there’s still the annual stupidity of the “debt ceiling” to get through, perhaps with the real fun and games pushed back to November but risking the same kind of panic which helped gold hit $1920 per ounce in summer 2011.

Short term – and this news-packed summer week more than most – precious metals owners who don’t like volatility should look away now. But further ahead, there are lots of good reasons to buy gold or silver. Chief among them is the unique exposure it gives Western investors to Asia’s long-term growth.

China, for instance, is set to overtake India as the world’s No.1 gold consumer this year. Buying perhaps 1,000 tonnes of gold – around 1 ounce in every 4 sold worldwide in 2013 – China is growing its jewellery demand, but not as fast as it’s hoarding investment gold bars and coin. So says Marcus Grubb of market-development organization the World Gold Council. And with the Shanghai Gold Exchange delivering 1,000 tonnes in the first half of 2013 alone – more than its users took in all of 2012 – that switch looks a good call already.

Marcus isn’t the first person to forecast this switch. We tried it in 2009, as did other better-informed analysts. We were all wrong then. But 2013 looks more certain, as Marcus notes. Because compared to China’s surging demand, Indian buying is of course being crimped by the government’s attempts to cut demand. So far all it’s managed is to crimp supply, boost prices, and unleash a return to smuggling.

Why does this matter to Western investors? First because, behind the noise of US futures trading, physically-settled metal is what counts in the end. And China, like India, continues to buy more gold at rising prices. Secondly, and longer-term, the economic future of Asian households looks a lot like the developed West in terms of disposable income. But unlike the modern West, the first thing which Indian and Chinese families with cash left over at the end of the month choose to do – their primary savings choice – is very often to buy gold.

Take note: The path between the last 20 years of Chinese economic growth and the much-lauded “Chinese century” before us may not prove smooth. Western analysts have long predicted a “hard landing” in China. But the near-term risks look plain (huge local government debts, massive property bubble, misallocation of national funds in pointless infrastructure). The upshot for gold and by extension for silver prices might not be pretty. It’s worth reviewing what SocGen’s latest Cross Asset Strategy note says on the subject of gold and a China hard landing.

The decline of the West has also long been forecast by misery-guts like ourselves. But rising prosperity in Asia will likely mean stagnant or falling standards of living here, on a relative basis if not absolute. And as we’ve long suggested, buying a little of what China uses to store its growing wealth makes sense long term.

But blocking out the noise won’t be easy meantime.

Adrian Ash, Guest Contributor to MiningFeeds.com

About the author: Adrian Ash is head of research at BullionVault.